HOA Capital Reserve Fund: There’s No Time Like the Present!

We’ve used this space in the past to talk about the importance of the HOA capital reserve fund for any community association board, and now is a good time to revisit the topic and discuss some of the key components your HOA board should make sure to have in place. It’s fall, and the holiday season is rapidly approaching. This is the time of the year when people are thinking about long-term finance, and about particular investment strategies for the coming year. It’s also when a lot of weather-induced maintenance issues arise. Both of these seasonal happenings are very pertinent to the creation of an HOA capital reserve fund.

Here are a few bullet points to keep in mind as you lead your HOA board to the implementation of a proper HOA capital reserve fund:

First, you should have documentation that accounts for all of the common assets of your community. These could include roads, common play or recreational areas, a clubhouse, and so forth. These common assets should be specifically listed in your HOA governing documents.

You should also have a capital reserve study—that is, a document that lists not only what these common assets are, but how they age, and what kind of long-term maintenance is needed.

You should have a long-term plan—twenty years or more—that accounts for your community’s investment into upkeep or replacement of these common assets.

Remember that maintenance is not just about aesthetics. Suppose you have a sidewalk or road that is damaged or iced over in a way that could lead to injury and potential liability issues; you’re going to need to fix it quickly.

Coming up with an HOA capital reserve fund can be tricky business, of course, as it requires careful analysis and a lot of foresight. That’s why it’s probably best to consult with your professional HOA management company to ensure that your plan is sustainable in the long term, and that it takes into account the best interests of your community as a whole.